States push for more transparency over drug prices

States are responding to increasing drug costs with legislation that would subject drugmakers to more scrutiny over their pricing.

Transparency initiatives may be more palatable than price-limiting ones or tackling patent protections, according to Aaron Kesselheim, an associate professor of medicine at Harvard Medical School, Wednesday at the American Medical Association's advocacy conference.

"Who could be opposed to transparency?” Kesselheim said.“To the extent that all of them are difficult hills to climb, that one might be easier because we're not changing anything, we just want things to be more open. So that seems more doable in the short term."

During the 2015-2016 state legislative sessions, dozens of states filed bills to require drugmakers, health insurers and pharmacy benefit managers to explain various elements of their spending and how they price drugs, according to the National Conference of State Legislatures (NCSL).

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Fifteen states have filed measures related to drug price transparency thus far this year, according to NCSL, including Maryland, which is pursuing two bills to force drug companies to explain price hikes and allow legal action for excessive price increases.

But those measures face significant pushback from drug lobbyists, who say such cost disclosures don't show the full picture of drug development and could hurt a highly competitive business.

The industry most recently flexed its muscle by defeating a California ballot initiative to restrict what most state-run health programs pay for prescription drugs.

The industry argues that information on development costs doesn't translate to patients, who would rather know how much they’re being charged for drugs and why certain drugs are covered by insurance while others are not.

“It wouldn’t do anything for patients,” Kirsten Axelsen, vice president for global policy at Pfizer Inc. “It wouldn’t do anything to bring down the price of drugs.”

Members of Congress have floated similar transparency measures. The issue is likely to get some attention within the broader discussion around user fee agreements that fund drug approvals, which are due for reauthorization this year.

The report would include manufacturing, research and development costs for the drug, net profits, and marketing and advertising spending. Companies failing to comply would face civil penalties of up to $100,000 per day.

However, those proposals are ancillary to the agreements made with the Food and Drug Administration, which has nothing to do with how drug prices are set, Kesselheim said.

He agreed that more transparency won’t change prices, which are set on what the market will bear and affected by market exclusivity rules that protect some drugs from competition.

But a clearer understanding of drugmakers' research and development, marketing and administrative costs would help state payers and policymakers evaluate the reasonableness of a price, Kesselheim said.

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